The company’s 2008 sales totaled $1.2 million.
The
company is growing, but not from franchises. Knight gave up that
business model because he found it challenging to meet franchisees’
business priorities and profit expectations. Instead, the local
entrepreneur has built on a contract originally with 18 Scott’s Food
& Pharmacy stores to strike a deal to sell his cartridges
throughout Kroger Co.’s Central Division, which includes 153 grocery
stores. Kroger bought Scott’s from SuperValu in 2007 for an undisclosed
price.To make and deliver the quantity of cartridges needed to supply
Kroger, Knight and his partners had to invest about $1.9 million in
equipment, supplies and inventory.Eight silent investors own a minority
share in the company. Six others, including Knight, combine for a
majority share. They include Curt Brown, former president of Tower
Bank, and Pat Michaels, a local attorney with Barrett &
McNagny.Brown got involved in the business in late 2006 at the
suggestion of some friends who’d decided to buy shares. When he
realized the company hadn’t marketed itself to local businesses that
could save money by buying remanufactured toner cartridges for larger
printers, Brown saw opportunities to invest and to make some sales
calls.“I kind of came in and rolled up my sleeves and developed the
business-to-business side of Cartridge City,” he said.After two years,
Brown seized another business opportunity and passed the business
customers back to Knight, who was ready to handle them along with the
growing retail business.

Solid values
Brown and his
fellow investors consider Knight a “very smart” person who has solid
values based in his faith. As for the business model, it was good but
needed tweaking. Mostly, the company needed more cash to help reach the
next level, Brown said. And closing the Kroger deal allowed the
business to jump ahead about three levels, he said.“The Kroger contract
is just a significant advancement for Cartridge City,” Brown
said.Investors aren’t the only ones who gave Knight a leg up. The
outgoing Scott’s president passed along a good word about Knight and
his products during the acquisition. Kroger executives continued the
contract in Scott’s stores before expanding it dramatically.Kroger
spokesman John Elliott said the grocery’s contract with Cartridge City
is “working very well.”“That’s another example of a best practice that
we learned from Scott’s and we have carried statewide,” he said. “It
could potentially go even further than Indiana. Aaron does a great
job.”Cartridge City’s retail displays are being set up throughout the
state, with northern Indiana completed in March. The Central Division’s
Illinois stores by mid-May.

1,500 types
The
remanufactured inkjet cartridges can be used in printers made by HP,
Canon, Brother and Dell, among others. Cartridge City carries more than
1,500 cartridge types, including toner cartridges used by business
printers. Prices range from $5.99 to $24.99 for inkjet cartridges and
$20 to $200 for toner cartridges. Knight sells to almost 600 business
clients in addition to consumers who shop at Kroger and Scott’s
stores.Knight would like to add 500 retail outlets this year and expand
into the Columbus, Ohio; Cincinnati; Detroit and Louisville, Ky.,
markets.

Demand is strong.
About 500 million inkjet
cartridges – totaling about $10 billion – were sold in the U.S. and
Canada in 2008, according to data provided by Andy Lippman, senior
analyst for Newton, Mass.-based Lyra Research Inc.About 60 million – or
about 12 percent – of those inkjet cartridges were remanufactured.
Sales totaled about $900 million, Lippman said in an e-mail. Sales
volume increased about 30 percent over the last five years.Walgreens
stores also sell refurbished inkjet cartridges and provide a service
that refills inkjet cartridges in more than 3,000 stores, spokeswoman
Tiffani Washington said.Demand has been steady since Walgreen Co.
launched the service in 1,500 stores in fall 2006, she said. Washington
was unable to provide sales figures.

The remanufactured cartridge industry has more room to grow.
Last
year, American consumers threw away about 150 million ink cartridges,
both newly constructed cartridges as well as remanufactured cartridges
that have exceeded their maximum life, According to Lyra data. Fewer
than 10 percent of the ink cartridges sold in the U.S. were returned by
consumers.Cartridge City pays $3 for each returned inkjet cartridge.
Although they can’t be remade indefinitely because the electronics
eventually go bad, the company doesn’t penalize consumers who turn in
cartridges that can’t be used again. Only about 5 percent of returned
cartridges are defective, Knight said.